Nearly all workers are categorized as either self-employed or a staff member of another person or company, and every status has its benefits and drawbacks. In this post, we shall analyze the concept of the statutory employee, as well as the conditions surrounding their existence and operations. The pros and cons of box 13 statutory employee will also be addressed to understand the rules guiding their employer.

Who is a statutory employee?

For clarification, it’s necessary to define the term. A statutory employee is a contractor who is independent, and according to standard law rules is regarded as an employee under the statute concerning specific employment tax intentions.

The statutory employee can deduct their costs on a Form 1040, Schedule C, Profit or loss from business as immediate counterbalances to income. The flexibility in their operation is one of the benefits they enjoy, although they still have to make payment for the self-employment tax, which contains the business and worker share of FICA tax. The employee pays half of the social security and Medicare taxes while the employer/company makes payment for the other half.

In any case, full employees don’t have the luxury or capability to deduct their costs directly from their income. Instead, the employee expenses incurred from the business are liable to 2% of gross income restriction. Hence, a lot of employees aren’t able to get any tax reduction for their business expense which isn’t reimbursed.

A statutory employee enjoys the best of two worlds; some of the advantages of full employees and the benefits of independent contractors as well. They are similar to self-employed persons yet without significant investment in the offices utilized in the execution of services. The consideration of who qualifies as a statutory worker revolves around the prevailing circumstances.

Income tax is not deducted from the wages of statutory employees as they pay the income tax. They receive Form W-2 with box 13, statutory Employee, checked apart from Form 1040 and schedule C to accurately collate expenses accordingly.

Home workers as statutory employees

Some statutory employees are home workers who perform services on specific terms and conditions as follows:

Off the business premises of the principal

Services according to specifications or guidelines received from the principal

Work on materials provided by the principal

Items earmarked for delivery back to the principal or someone assigned to him or her.

It’s important to emphasize the fact that the place a home worker executives a task or renders service doesn’t stand for the home office deduction stipulated in Sec.280A. Furthermore, a plain reading of the statute and regulations indicates that the service doesn’t have to be executed at the employee’s home. It’s essential for the employee to perform the services in another place apart from the premises of the employer.

Statutory employees are more affordable to hire in comparison to regular employees. Nevertheless, they are more expensive to engage when compared with independent contractors as employers are required to pay Social security and Medicare taxes on wages in the FICA tax form.

Some variables are taken into consideration in determining if a worker is a statutory employee, such as the level of control an employer wields over the worker in the performance of duties as being the most significant factor amongst others.

Statutory employees are made up of the following:

Drivers- agents or commission

Full-time insurance salesperson

Specific home workers

Sales representatives (traveling or city) that market products and services to business customers.

The employer and statutory employee must have a service contract that guides their business relationship which stipulates that all the services executed by the category as mentioned above must be carried out directly by the person. Additionally, the principles for a statutory employee have no bearing for any person who has significant level of investment in the facilities utilized in the execution of the services with the exception of transportation facilities. As a result, the individual isn’t permitted to own a private vehicle for transport in the execution of duties and services. Furthermore, the conditions for statutory employee are not applicable if the services are a solitary transaction and not part of a proceeding business relationship. A significant investment in facilities demonstrates the worker is an autonomous contractor.

Statutory employees are more similar in nature to independent contractors by reason of factors that determine their status. However, the difference between the statutory employee and the independent contractor lies in the fact that the former has more claims to benefits than the latter.

Consequently, the court itemized some factors to ascertain whether an individual is a statutory employee or an independent contractor, and acknowledges that each of the factors is determinative so they ought to be evaluated together and not in isolation. The emphasis was on the level of control a principal has over the individual than on other variables such as the party that invests in facilities being used in the execution of work, the ability of the principal to dismiss the individual, and the chance of the individual to make profit or loss.

Hence, to be categorized as a statutory employee the individual must display traits of an independent contractor who has more control over the performance of a task with little supervision from the employer. The courts usually check to verify the intention of the parties involved to ascertain statutory employee status.

Although the employer doesn’t deduct income tax from a statutory employee, the individual is responsible for payment of his or her income tax just like independent contractors.

The employer must provide the statutory employee with a form W-2 which has the “Statutory Employee” option checked in Box 13.

Overall, the statutory employee holds more benefits for the employer and employee as the former doesn’t have to make provision for office space as business expenses incurred are deducted from income.

Happy Holidaysto all of you. Thank you for being a friend of The Ohio Cooperative, and for sending all of your wonderful comments and questions. We enjoy reading them every day, and look forward to reading many, many more.

Thanks to our followers who joined our newsletter. We promise to deliver updated happenings of the cooperative, its organizations, and affiliates.

We’re ending 2017 with over 80 Impact Funds, and 1 Fund of Funds. 2018 is going to be a great year of cooperation.

The Ohio Cooperative has two distinct career paths: Consultant to Partner, and Coordinator to Director.

Our consultants assist organizations and clients in achieving their performance goals. Our coordinators are responsible for the overall management and operation of an organization. Consultants earn 25% of qualified work-orders monthly, while coordinators receive a base salary.

Both career paths advance through completion of the executive development plan (the “EDP”). The purpose of the EDP is to allow anyone with motivation and ambition to achieve career advancement. The EDP consists of activities, which must be completed for the first advancement, and competencies, which must be completed for the second advancement. Activities are waived if a mastery level education is completed, and competencies are waived if a doctoral level of education is completed.

Upon completion of the EDP to the first advancement level, consultants gain the title of Senior Consultant and the opportunity to earn 3% of merger and acquisitions deals. Coordinators receive the title of Program Manager and a higher salary upon completion of the first advancement requirements.

Upon completion of the EDP to the second advancement level senior consultants gain the title of Partner and earn a bonus based on their relative contribution to the success of the partnership. A Partner may also complete additional competencies to become a Managing Partner and gain overall responsibility for an Impact Fund® and earn five percent of carried interest. Program Managers earn the title of Executive Director with a higher salary and potential bonus from their respective organization.

What’s the difference? The consultant career path is 100% commission based, while the coordinator career path is 100% salary based. Some thrive in a commissioned environment while others enjoy the security of a dependable salary. Neither is better than the other.

Commission based positions offer advantages because income is earned based on your skills and the amount of work you do. For consultants who work hard and who are skilled, they will be remunerated for their significant efforts. This acts as a reinforcement for employees to improve and go above the minimum requirements, realizing that their efforts will generate more income.

On the other hand, a salary based position is beneficial because it provides a steady, reliable income. The employee is aware of the exact amount of each paycheck. This way, the worker can draw a budget which fits into his salary without worrying about fluctuation in their income at any given time.

Whether a commission or salary based position, the career path you seek should match with both your goals and lifestyle. This way it will serve as a motivating force to creating work-life integration and happiness.

As a digital workplace, worker-owners must follow residency requirements. Worker-owners must maintain a permanent home in Ohio, and spend no more than twenty-one weeks on travel, vacations, or living at their second home. For further clarification please contact the Ohio Department of Taxation.

If you’re someone who enjoys creating innovative ways to reach ambitious goals, thrive on working within a remote collaborative team-based environment, and energized by receiving honest feedback, check out our Careers Page.

In order to achieve happiness one must balance their Faith, Family, and Finances. At The Ohio Cooperative happiness is a journey we all must take. In order to foster that journey we had to develop key structural policies. In this presentation we will take a short glance at the 6 keys to our cooperative culture. These key components will not only guide the behavior and actions of our workers, but also set a foundation for their journey to happiness.

Our first key is: Worker-ownership.

Worker-ownership refers to the organizational structure of ownership of a company by its workers. When workers acquire cooperative share directly, they become direct owners, and can exercise all the rights associate with ownership, including share of the company’s equity value and voting rights.

Our second key is: Democratic control.

Democratic control refers to the organizational structure where worker-owners actively participate and serve as elected representatives. The Ohio Cooperative Workers’ Council is our elected body of representatives that ensure the cooperative is performing profitably and focused on its’ mission.

Our third key is: Horizontal team-based.

A horizontal team-based structure allows our teams to have direct ownership of the wins they accomplish. Allowing teams to win will allow our organization to eliminate wasteful processes and designs while being increasingly flexible to accomplish our goals and rapidly respond to client needs.

Our fourth key is: Diversity and inclusiveness.

Inclusiveness is the component that makes diversity work. One without the other is a losing battle. One of our most important advantages is the ability to learn from and accept different cultural perspectives. These perspectives allow our teams to harness the power of our differences to drive innovation.

Our fifth key is: Digital workplace.

Our digital workplace is founded on the art of telecommuting. Majority of our non-specific location based positions are telecommuting. Meaning our teams utilize our toolbox of software technology to create the virtual equivalent of a physical office workplace. Teams can operative from any location.

Our sixth key is: Charitable giving.

Charitable giving is a hallmark our work. Through our many grant-making foundations our worker-owners are proud to support the needs of our community by proving grants to local charity organizations that align with the goals and guidelines of the specified community grant program.

The foundation on which these key components sit is our vision of: Helping workers be more successful. It’s a broad vision that will guide us strategically to develop the best worker-owner opportunity in the world.

References:

Schein, E. H. (1995), The Role of the Founder in Creating Organizational Culture. Family Business Review, 8: 221–238. doi:10.1111/j.1741-6248.1995.00221.x

Seeking Impact: Private equity fund of funds

Cincinnati, OH: The Ohio Cooperative, a worker-owned cooperative, announced the development of a Private Equity Fund of Funds team to focus on global private equity impact investments.

The Fund of Funds team will build relationships with private equity general partners that have proven track records, demonstrating knowledge and experience with impact investing. The Fund of Funds team will seek to make a handful of commitments into private equity limited partnerships that focus on our core mission of intentional social and environmental impact.

The fund of funds will benefit the worker-owners and Impact Fund® Partners of The Ohio Cooperative, adding unparalleled value to the cooperative by putting global returns into the pockets of local Ohioans and local economies.

“Our goal is to build value for our worker-owners, and Impact Fund® partners by developing an exclusive FEE FREE fund of funds designed to give them access to global private equity impact investment opportunities,” said Robert Farris, Chairman and President at CoNimby Foundation.

The fund of funds team has yet to be named.

About The Ohio Cooperative

The Ohio Cooperative is a worker-owned cooperative focused on community development, job creation, and job growth. It’s a digital workplace where majority of workers telecommute.

The Ohio Cooperative average client is a start-up, community development project, business branch, or an established small business that are all wholly owned by the cooperative. Servicing a client where you don’t share in the profit and loss is a different lens than servicing one where you share directly in their success.

Worker-owners are paid 100% net income distribution on cooperative shares owned; therefore their patronage is a direct reflection of how well they do their job.

When a new start-up, community development project, branch expansion, or acquisition is green lighted worker-owners know if it’s profitable they’ve just given themselves a raise.

Even though The Ohio Cooperative provides dedicated turnkey solutions for outside clients whom they don’t have an equity relationship with build strategic capabilities ensuring a high-performing enterprise, the meat and potatoes are inside growth.

Focusing on outside clients is vital for business growth. Nevertheless, sustaining healthy relationships with the inside clients is just as important. Understanding your clients’ business and knowing how you fit into their overall goals is an indispensable part of its success.

Many companies assume that their clients need them to solve a problem, but far from it, they are after businesses that can produce outcomes for them. They contacted you because they believe you can take their brand to a higher echelon, develop positive public relations, and guide them during a crisis..

Helpful Tips

Know your client’s business and always research

What do you know about your client’s business? Can you provide answers to questions such as:

Who are the company’s top competitors?

What is the company’s strategic plan?

What is the potential market for the company’s products?

What are the latest trends in the industry?

In business, first impression matters a lot. You can easily impress your clients if you show that them you have carried out research on their business and industry. Researching the main competitors of a client is vital for achieving business success. It is essential to understand the nature and environment of their industry. This alone shows that you care and wish to see your client succeed. Attending a meeting without proper preparation will give them the impression that you are not giving them enough attention.

Change is constant. Always be on the lookout for new trends in the industry. This will keep your client’s business at the top. It will give them a peace of mind knowing that you’re doing your best to keep them ahead in this fast-pacing world of media relations and business.

Understand your client’s expectation

The need for establishing trusting relationships between businesses and their clients makes it important for businesses to be aware of the expectations of their clients and be flexible when there are changes in these expectations. Businesses must understand the clients and their unique needs, their fears, beliefs, and limitations if any. There is a risk of under-performing if businesses don’t understand their role in client relationships. Clients would likely retain and recommend businesses that give them value.

Send positive vibes

Positive vibes are one of the most useful tools in building successful business relationships. When you send out good vibes, your prospects will find themselves reverting positive energy which is a WIN WIN for both parties. Appropriate smiles are highly contagious, and wearing one can get your client to let his guard down. Smiling and sending positive emotions are plain fun and require less effort than frowning.

Conclusion

The Ohio Cooperative understands that their most valuable asset is their inside client base and they do everything possible to maintain a good, lasting relationship with them.

Horizontal leadership is essentially working relationships across organizational boundaries; forcing cooperative worker-owners to treat each other with mutual respect and reciprocity.

Top down command and control leadership has no footing in the cooperative. Here a leader isn’t a permanent title; it’s an experienced based skill-set. It’s a talent based role that is played at any given time by any given person, who the next day must play, equally well, the role of a team member. You have to be good at trusting your fellow worker-owner, and at being trusted. Each worker-owner has to behave as leaders or the cooperative simply won’t succeed.

As a living breathing entity The Ohio Cooperative is a continuously growing environment nurturing all worker-owners to achieve FAME (Hills, 2001). FAME drives homes the team-based learning concept of: Feedback, Achievement, Motivation, and Expertise. Feedback must be given not only to individual team members but to the team as a whole. Everyone shares in the learning achievement of the team and take pride in their accomplishments. Team motivation is a collective drive to work interdependently and do things for the betterment of the team. Expertise is gained from team experiences and accomplishments. The FAME concept was essential in developing a structure that would allow for self-elevating teams.

A committed unified results driven competent structure is needed to elevate team goals in a collaborative high standard environment. When designing The Ohio Cooperative I remember not only my own military training but what I learned from reading, Team of Teams: New Rules of Engagement for a Complex World (McChrystal, S. A., Collins, T., Silverman, D., & Fussell, C., 2015). In his book Gen. McChrystal speaks about how he had to discard a century of conventional wisdom and remake the task force into a network that combined transparent communication with decentralized decision-making authority.

The horizontal leadership of the teams of teams’ structure allows the cooperative to develop fundamental continuous learning objectives and achievements while maintaining an ecosystem where teams can operative effectively.

Motion 1: To hire an Executive Director for the Women’s Foundation of Ohio.

The Women’s Foundation of Ohio is our grant-making foundation that supports charities throughout the state that focus on women issues. Hiring an Executive Director would guide the program and fulfill its charitable purpose while lessening the burden on CPAC.

RESULTS – NO

Motion 2: To support Ohio House Bill 581.

Ohio House Bill 581 authorizes Series limited liability companies. The passing of HB 581 would support the statewide job creation and job growth efforts of The Ohio Cooperative by allowing us to secure separate rights, powers, and duties per each small business.

RESULTS – YES

Motion 3: To develop equity investment impact fund.

The Ohio Cooperative only operates in the impact investment space through our impact funds. Developing an equity fund would require the partnership of a sub-adviser.

RESULTS – NO

Motion 4: To develop a headquarters office space.

The Cooperative Personnel Administration Center, CPAC, is the only office space the cooperative maintains. This allows majority of non-specific location worker-owners to work from home. Developing a headquarters would require majority to report to an office location.

RESULTS – NO

Motion 5: To hire an Executive Director for the Ohio Media and Marketing Association.

The Ohio Media and Marketing Association, OMMA, marketing associates currently report directly to CPAC. An Executive Director would oversee all marketing associates, manage marketing plans, and achieve other objectives for cooperative small businesses.

RESULTS – NO

Motion 6: To establish The Ohio Cooperative Workers Council.

The Ohio Cooperative Workers’ Council will consist of one (1) worker-owner per State County to represent the people of that county in Board Meetings. Each council member must be voted in and will serve a three year term.

RESULTS – YES

Motion 7: To submit employment numbers to the Ohio Development Services Agency.

The submission of employment numbers includes: Temp, Part-time, and Full-time workers to the Ohio Development Agency. The Agency collects employment data on employers throughout the state.

RESULTS – TABLE 2018

Motion 8: To appoint Sunbelt Business Brokers as acquisition partner.

The Ohio Cooperative acquires small businesses through its social enterprise Impact Funds to maintain a diversified portfolio. The cooperative is seeking to develop an exclusive partnership with one company that specializes in small business acquisitions.

An Impact Fund®, a registered trademark of The Ohio Cooperative, is an impact investment vehicle dedicated to utilizing philanthropic capital to foster community development, job creation, and job growth.

Impact investments are investments made into companies, organizations, and funds with the intention of generating social and environmental impact alongside a financial return.

We use a defensive portfolio strategy, a method of portfolio allocation and management aimed at minimizing the risk of losing principal. Our strategy entails regular main street acquisitions to maintain asset allocation and a focus on the basics to defend against sensitivity to adjusted business cycle risk.

Our portfolio managers’ goal is to focus on the analytical side of balancing the impact investment portfolio by determining the appropriate level of risk based on its’ impact on the regional community. To successfully construct portfolios that maintains an in-depth understanding of community conditions, trends, and overall economic outlook.

With an open ended structure portfolio managers’ can reinvest capital and gains received from successful investments, operations, and exits while managing non-performing cash balances by raising capital as-needed. These opportunities make the Impact Fund® suitable for institutions who seek impact investment opportunities with a need for compounded concessionary returns and liquidity.

Notes of compounded return

The flexibility of compounded concessionary return strategies can be appealing to investors concerned about rising risk, but a mindful approach to duration can help create a portfolio well suited to navigate the challenging impact investment industry.

Compound return is achieved when you invest a certain amount of money at a particular rate of return. And, as soon as a return is received, along with the profits, you reinvest at a larger amount. This implies that as your profits increase so does your investing potential.

Impact investments take on the approach that builds tangible and intangible assets where the economic value is not traded off for social value which may result in below market returns.

The longer money is invested in an Impact Fund® the more it grows – thanks to compounded concessionary preferred return. This makes compounded concessionary returns very important to impact investors seeking returns.